The typical physician billing system that is used in most hospitals includes a physician carrying 3″×5″ cards, visiting a patient and afterwards assessing the extent of service performed and entering a diagnosis and procedure on the card, which determines the amount to be charged. The physician then provides the cards to the billing department. Although it sounds simple, there are many inefficiencies and hazards in this process that can result in unrealized revenue, lost revenue, and fines from healthcare insurance reimbursement agencies.
The card approach has documentation problems such as overbilling and underbilling. After seeing the patient, the physician typically documents the visit on the patient's medical chart. The physician then uses official billing guidelines to determine that these guidelines are confusing and change often. For example, a physician may confuse the difference between “Initial Inpatient Consultation” and “Confirmatory Consultation,” or “Hospital Observation Services” and “Hospital Observation or Inpatient Care Services.” A mistake in this determination can lead to denied reimbursement and a possible fine (up to $10,000) per transaction.
As another example, a physician may confuse levels 2 and 3 of “Initial Hospital Care.” Both require documentation of a comprehensive patient history and a comprehensive exam. But level 3 requires “medical decision making of high complexity” while level 2 requires only “moderate complexity.” A mistake in this choice can also lead to denied reimbursement and a possible fine.
What ultimately justifies the physician's reported category and level of service is the documentation he/she enters into the patient's record. The difference between a denied claim and a reimbursed one can be as simple as whether the physician examined nine body systems or ten. Physicians are expected to remember and abide by these micro-managing guidelines but typically cannot.
In order to avoid accidentally billing for too high a level of service, many physicians habitually underbill. That is, they always bill at the lowest level in order to ensure compliance with the guidelines and avoid fines. This results in a huge loss of revenue for physicians, clinics, and hospitals, because the difference in price between two levels of service can be $20 or more.
Further, the card system suffers from billing latency (or “charge lag”) and lost cards. In an inpatient setting, a physician may have 35–40 patients whom the physician visits during rounds. For each patient, the physician carries a 3″×5″ card—often using different coat pockets as a makeshift filing system—on which to record the category and level of service the physician performs each day.
The physicians have a habit of holding onto the paper cards for too long. They typically wait until patients are discharged (maybe after weeklong stays), and then actually submit the cards to the billing department at the end of that month. This long delay between the time of service and the time of billing card submission is known as “charge lag,” and can average thirty-six days at many hospitals. That is a long period of time for a large amount of money to remain in the insurance companies' coffers rather than the hospital's. Of course, this assumes the physician has not already lost the card, in which case the charge is never submitted.
Lost charges from failure to enter information on cards are much like lost cards. Again, records of services and procedures performed do not reach billing personnel. In this case, it is simply because physicians have demanding schedules and it is often too inconvenient, difficult, or time-consuming to record billable events. When the appropriate form or chart is not easily available, many physicians will try to memorize what they've done and write it down later.
In summary, the existing paper-based billing card system has severe problems:
Overbilling: Billing for too high a level of service means noreimbursement, possible fines, and wasted time re-submitting theinsurance claim at a lower service level.Underbilling: Billing for too low a level of service, while ensuringcompliance with official billing regulations, means losses at least $20 perpatient per visit.Late and lost cards: Reimbursement is unnecessarily delayed or does notoccur.Lost charges: Some billable events are never recorded.